Why the Dow Hit Another Record, but Rite Aid and Diamond Foods Shares Fell

The blue chips climbed again on good news from the European Central Bank, but Rite Aid and Diamond Foods fell on earnings.

Jun 5, 2014 at 10:00PM

Today, investors got the interest rate cut from the European Central Bank they were hoping for, and stocks jumped as a result. The Dow Jones Industrial Average (DJINDICES:^DJI) and S&P 500 closed in record territory once again, as the blue chips gained 98 points, or 0.6%, and the S&P improved 0.7%. The Nasdaq moved up 1%. 


Taking steps to boost the economy and counter the threat of deflation, the European Central Bank cut benchmark rates to 0.15% and, for the first time, introduced a negative interest rate on deposits at 0.1%. This means that banks will have to pay the ECB to hold on to their money. That move could spur more lending and help fuel its sluggish economic recovery. The European economy is on stabler ground than it was a few years ago when the central bank was offering bailout assistance to the weakest economies, but growth on the continent which, along with the U.S. and China, is one of the world's three major economic engines, has lagged, causing headwinds at a range of companies, especially manufacturers.

Elsewhere, the number of first-time jobless claims rose slightly from 304,000 to 312,000, slightly above expectations of 310,000. The number still remains near post-recession lows, and the four-week average for initial claims dropped to 310,250, its lowest point since June 2007. Continuing unemployment claims also fell once again, dropping to 2.603 million, the lowest it's been since October 2007. The reports bode well for tomorrow's official jobs report, which will let the market know how many jobs were added last month, and what the current unemployment rate is. Economists are predicting 220,000 new jobs were added in May.

After hours, Diamond Foods (NASDAQ:DMND) was getting crunched, falling 9% on a disappointing earnings report. The maker of nuts and branded snack food products, including Kettle Chips, said revenue increased 3.2%, to $190.9 million, short of estimates at $191.7 million, while its adjusted per-share profit of $0.11 missed expectations of $0.17. Performance in its Snacks segment was strong, climbing 9.6%, though sales of Nuts continued to fall, declining by 5%. CEO Brian Driscoll said he was "very pleased" with year-over-year improvements in sales and gross margin. In its guidance, management only said it projects an increase in adjusted EBITDA despite increased tree nut commodity costs. Investors still seem to be waiting for Diamond's profits to come following an accounting scandal two years ago that forced the CEO and CFO to resign. Still, sales turning positive, and an improving gross margin, are certainly positive signs.

Earlier in the day, Rite Aid (NYSE:RAD) shares tumbled on its own weak outlook, finishing down 8%. The drugstore chain said that higher-than-expected costs for generic drugs were weighing on its bottom line, and it expects a per-share profit of just $0.04 this quarter, below estimates of $0.08. For the full year, it lowered its EPS guidance to $0.30-$0.40 from $0.31-$0.42, against the consensus at $0.39. Guidance on the top line was unaffected, and sales continue to steadily improve as Rite Aid said comps increased 3.5% in May. The lowered guidance was only minor, but shares have nearly tripled in the last year, so the stock price may have finally gotten ahead of expectations. 

Will this stock be your next multi-bagger?
Give us five minutes, and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer handpicks one stock with outstanding potential. But it's not just any run-of-the-mill company; it’s a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year, his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252%, and 1,303% during the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers